Facebook sites face scrutiny for NCAA March Madness pools

Online wagers may violate U.S. gambling laws

Take two modern American pastimes, the office pool for sports betting and social networking Web sites like Facebook.

Put them together and what you get is an efficient way to organize wagers for college basketball's March Madness. And a new crime.

People who host online pools and collect fees conceivably face criminal charges and jail if found guilty of operating an illegal online gambling operation.

"It is fair to say this raises questions" with the FBI, said agency spokesman Ross Rice. "There could be a violation if there's a payout and if the operators take a cut."

Even before the NCAA men's Division I basketball tournament begins next week, more than 20,000 online pools are circulating on Facebook, which has roughly 70 million members. Many of the tourney pools have just one or two members at this point -- the organizers -- but other groups have already reached the hundreds.

It is unclear how many are asking for money to play, but at least several are.

One site touts that last year saw "a top prize of nearly $300, this year we are aiming for a total pool of at least $500."

The "$$ M&R 2008 NCAA Tournament Pool $$" Facebook pool advertises that the group is for "those of you interested in participating in our **prize money**." Another Facebook page even lists individual names and payouts from last year's tournament.

Bigger than anticipated

One real estate agent in North Carolina who set up a pool is charging $20 to join and said it was intended just for his friends.

"We originally planned on having 10 to 12 people in it, but already we're up to 40," said the agent, Damon Martin. "We may have a pretty big pot."

He says he doesn't know half the people who have joined, but as long as "they send me a PayPal invoice, no problem, I will tell them they will be in the group."

Internet gaming is illegal in the United States, making it fairly obvious to gambling experts that running a March Madness pool on a social networking site like Facebook is against the law. Also, unlike most office pools, the online pools are far more likely to have players from several states. And with the exception of horse racing and lotteries, interstate wagering is illegal.

The influx of online gaming via social networking sites also comes as the European Union takes aim at U.S. online gaming laws. Earlier this week, European gambling operators requested an investigation into U.S. gambling laws, questioning whether the U.S. ban on Internet gambling violates international trade laws. Facebook does not operate the pools -- they are applications from third parties that are added to a user's profile page -- but the social network made it easier last year to download pool applications. As a result, the applications help organizers easily track game results and the performance of the players who join the pools.

Questions at CBS Sports

One application developer is CBS Sports, which has the exclusive rights to broadcast the hoops tournament.

Promoting online gambling was "not our intent with the application," said LeslieAnne Wade, a senior vice president for CBS. "These are new issues that are going to require new thought processes and new answers." But she added that "we'll have people look at it."

In a statement, Facebook said it "does not condone the use of the site for any unlawful purposes, and users must agree as part of the Terms of Use not to conduct illegal activity." The company wouldn't comment further.

Las Vegas attorney Anthony Cabot of Lewis and Roca LLP Lawyers, who is an expert on online gambling issues, said there are two key elements that make an online pool illegal. One is if "people pay" to play and the other is if they "win a prize in a game of chance as the result of an event they are not participants in. Such as sports wagering."

"So if you're doing something where people are paying money for the opportunity to win a prize, then there's a strong possibility they could be violating the laws of a majority of states," he said. "There is no question this raises legal issues. ... It's a pretty straightforward situation."

Office pools proliferate during big sporting events, such as the Super Bowl and March Madness. Career site Vault.com estimates that 48 percent of workers participate in the NCAA men's basketball tournament, just behind the Super Bowl's 51 percent participation rate. And while those pools are allowed to flourish because they are largely done as "a social activity," Cabot said the nature changes if it becomes a commercial venture in the public "for a profit."

Worth a closer look?

Whether any agency would investigate the online pools is in question, the FBI's Rice said. "The main issue we would likely face is if this is worth our resources to investigate."

A spokesman the U.S. attorney's office declined to comment, saying it would be "inappropriate."